New research from Capgemini’s Digital Transformation Institute predicts that adopting smart factories could enable the global automotive industry to achieve US$160 billion per year in productivity gains by 2023.
The Automotive Smart Factories: How Auto Manufacturers can Benefit from the Digital Industrial Revolution report indicates that automotive manufacturers with smart factories will grow productivity by an average of 7% from 2023. Meanwhile, a global top ten automotive manufacturer (those with an average revenue of US$158 billion and an operating margin of 6%) can expect to gain an additional US$4.6 billion or a 50% growth in operational profits annually within five years of a full smart factory implementation.
Around 46% of automotive companies already have a smart factory initiative, while a further 43% are developing their strategies. By the end of 2022, automotive manufacturers expect that 24% of their plants will be smart factories. However, 42% said they are not currently on track to realise the full potential of smart factories because they are struggling with switching to new digital technologies.
According to the report, the companies who are making the most successful progress are those who are investing three times as much money and adopting software such as advanced analytics and artificial intelligence-based components. Meanwhile, automotive manufacturers who are struggling are too focused on hardware-based components.
Capgemini found that almost half (46%) of original equipment manufacturers (OEMs) have been successful in their smart factory initiatives, compared to less than a third (32%) of automotive suppliers. Hence, the report recommends that OEMs help suppliers to create smart factory processes by providing financial support and driving innovation via start-ups and academies.
“Digital maturity holds the key to realising the full potential of smart factory initiatives,” said Nick Gill, chair of Capgemini’s Automotive Council. “This study clearly demonstrates the enthusiasm among automotive organisations to invest in smart factories and the awareness of the long-term benefits. However, more can be done for automotive suppliers to take a collaborative approach with OEMs to optimise their smart factory initiatives. The next few years will be critical as OEMs step up their digital maturity, accelerating outcomes to maximise business benefits.”